Ethiopia: AU earmarks financing breakthrough to advance democracy

Addis Ababa, Ethiopia (PANA) - African countries would now be required to choose the specific taxation options they prefer to raise funds for the implementation of the flagship African Union (AU) projects following a breakthrough on the alternative sources of financing AU-led mega-projects.

African leaders agreed during the 26th session of the AU Heads of State and Government Assembly held in Addis Ababa from 30-31 January that a number of tax measures could be explored to raise funds for the Agenda 2063 economic blueprint and the annual operating budget of the Pan-African institution.

AU Commission Deputy Chairperson Erastus Mwencha said the African leaders finally approved the implementation of the protracted agenda on the alternative sources of funding after clearing all concerns, among them, to ensure the taxes will not harm consumption of key services.

“There are breakthroughs in our search for alternative sources of funding,” Mwencha told reporters.

The leaders of the 54 African states finally accepted proposals by former Nigerian President Olusegun Obasanjo to raise funds through taxation to meet the AU’s financing needs.

The leaders were resolute during the 26th session of the Assembly deliberations that the Agenda 2063, which seeks to transform Africa economically and socially, requires stable funding locally to succeed.

“Africa must be the owner and financier of its own transformation,” Mwencha said.

According to the Deputy Chairperson, the African leaders had an “extensive exchange” of ideas on the alternative sources of financing the AU.

During the Summit, the leaders agreed on a criterion for sharing the budget, known as the assessed contributions, which has previously been based on each country’s Gross Domestic Product (GDP) size.

In order to raise funds, each country would be required to either choose to levy taxes on air tickets for all incoming tourists and surrender a section of the proceeds to the AU Commission.

They also proposed an email tax or an export-import tax, whichever is more appropriate for implementation to raise the funds.

There were concerns by some countries during the protracted process of negotiating the alternative sources of funding that the AU requesting member states to surrender national taxes was a violation of citizens' sovereign rights. Some countries such as Zambia had raised such objections earlier.

Most countries were satisfied with the research carried out by experts employed by the AU Commission to carry out “perception analyses” on the impacts of introducing the new taxes.

“We satisfied the member states that these would not have negative impacts. The Economic Community of West African States (ECOWAS) levies 5% on imports,” Mwencha said. “It yields resources. Our simulation analyses do not show it has any impact on any sectors. Re-investing this money shows it will not have an impact on demand and supply. The question is how to much each state should surrender after the tax collection.”

However, Mwencha said what was now required was a coherent system of managing the new system of raising funds and having them surrendered to the AU for use in some priority programmes.

The new funds raised through this broad project would be used to back programmes such as the “Silencing the Guns,” an AU peace and security initiative to completely end wars by 2025.

Mwencha said the funds would be used to support the implementation of early warning systems and support the AU’s Charter on democracy and good governance.

The funds would also be spent on the Comprehensive Agriculture Development Programme (CAADP), which has so far attracted funding to the tune of US$10 billion.

Mwencha said such programmes showed the interest in financing viable projects still remained high in Africa.
-0- PANA AO/MA 5Feb2016

05 february 2016 09:44:38

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